Training: Turn Grim Skill Levels into Great Opportunity

Tom Peters

The $30-billion-a-year corporate training bill of U.S. companies
looks impressive at first. But it is a small fraction of our
annual corporate hardware bill of about $400 billion. Our
training spending, only 75 cents per employee per day, is a pale
shadow of the training commitment of our most fearsome
competitors, such as Germany and Japan.

The neglect of training is but one outcropping of our favoring
of hardware over humans. This long-term bias is even reflected in
our tax code. TRW economist Pat Choate notes, “The federal
government contributes $3,200 to plants and technology for every
dollar it chips in for employee training through tax incentives.”

We may have gotten away with our neglect of human capital
development in days gone by, when cheap energy and the logic of
mass production created operations that relied on narrow,
specialized labor. But that world is long gone. Harvard political
economist Robert Reich presents a stark choice for America’s
industrial companies: ” … They can try to match the wages for
which workers elsewhere are willing to labor. Or they can compete
on the basis of how quickly and well they can transform ideas
into incrementally better products. The first path — toward
stable mass production — relies on cutting labor costs. … The
second path … involves increasing labor value. For managers
this path means continually retraining employees for more complex
tasks. … Both paths can boost profits and improve
competitiveness in the short run, but only the second can
maintain and improve America’s standard of living over time.”

If we commit to the second path, which means endorsing a crash
program in skill development as a national strategy, our firms have
some exemplary role models to look to. IBM has long been a leader in
training. Management expert Peter Drucker observed of IBM’s
founder, “[Thomas] Watson trained, and trained, and trained.” The
tradition holds today, and helps explain the firm’s resiliency in the
face of continuous and radical change. Among other things, every
IBM employee must spend at least 40 hours per year in the
classroom. Though service industries might seem, by definition,
to be more people-centered, and therefore training-oriented, they
are not. Yet, much of the success of bellwether service
organizations, such as Walt Disney Productions and Federal
Express, can be traced directly to a strategic emphasis on
training.

When training is offered, it’s often misguided. For instance,
training expenditures in retail operations are low to begin with;
to add insult to injury, a recent study suggests that new sales
clerks undergo 12 times as much instruction in cash register and
policy as they do in selling skills. Overall, magazine Training‘s
1986 survey reports that while about 70 percent of organizations
with over 50 people on the payroll provide training for their
middle managers and execs, only 25 percent train production
people, 30 percent train salespeople and 34 percent train
customer-service people.

Star businesses defy such misguided conventions. One of the
reasons that the extraordinary Connecticut grocer Stew Leonard is
successful is a training budget that amounts to $1,000 per
employee per year — five times the retail industry average; in
general, it emphasizes people skills. Even the 20-hour-a-week
high school part-timer is invited to take a 14-week, $600 Dale
Carnegie course in interpersonal relations. Furthermore, rather
than cutting the training budget when times get tough, the best
use it as their weapon of choice to deal with crisis. My
colleague Jim Kouzes reports that Pat Carrigan, the first woman
to manage an assembly plant at General Motors, turned around GM’s
Lakewood, Georgia plant by emphasizing partnership with people.
Her principal tactics included a two-week, pre-startup training
program for everyone, following a long shutdown during the 1981-83
recession. Her ongoing training program then provided 3,000
people with an additional 360,000 hours of instruction in the
next 24 months.

More often than not, the payoff from training can be quick and
monumental. For example, Bill Wiggenhorn, director of training at
Motorola, notes: “We’ve documented the savings for the
statistical process control methods and problem-solving methods
we’ve trained our people in. We’re running a rate of return of
about 30 times the dollar invested.” Yes, that’s 30 times, not 30
percent.

I suggest that you begin to address the training issue by
assessing your relative total work force skills , as a
major part of your strategic planning process. That is, assess
your total skill level in relation to your domestic and
foreign competition, and determine whether that level is
increasing or decreasing versus key competitors. To underscore
the importance of training, I further propose that you review the
training budget before the capital budget — and spend
at least as much time in your strategic review on human capital
issues. Finally, evaluate the content of every course every six
months relative to market opportunities and changes in the
marketplace.

When I start seminars these days, I insist that competitive
conditions demand that companies take on bold goals. One of the
handful of bold goals I urge is a two- to four-times increase in
the training budget over the course of the next 36 months. While
I surely don’t believe in throwing money at the wall with regard
to any issue, I do believe that the situation vis-a-vis skill
levels is that grim. Or to state it optimistically, the
opportunity is that great.